Basics of GST HST Filing: How to Maximize Your GST/HST Refund

Simplifying GST/HST: Your Guide to Filing and Maximizing Refunds

When it comes to GST HST filing, there are so many nitty-gritty details that it’s easy to feel overwhelmed. If you’re just approaching the subject—maybe as a new immigrant to Canada or someone starting a business—it might seem daunting. But hey, worry not, that’s exactly why we’re here!

In this post, we’ll break down all the basics of GST/HST in a way that’s easy to understand. By the time you finish reading, you’ll feel way more confident in your ability to not only understand everything GST/HST-related but also take full advantage of the strategies to maximize your GST/HST refund. We’ll equip you with practical information and tactics to ensure you claim the maximum Input Tax Credits (ITCs) you’re eligible for.

At the end of the day, we’re rooting for your financial prosperity and success—and this crash course is just one way we aim to help you achieve it! Let’s get started.

What is GST/HST?

Let’s keep it super simple: GST stands for Goods and Services Tax, and HST stands for Harmonized Sales Tax. These are taxes you pay when you buy things in Canada—kind of like a small extra fee added to the price of goods and services.

Here’s how they work:

• The federal government collects GST, which is 5% across Canada.
• Some provinces have combined their provincial tax with the federal GST into one single tax called HST. That’s why it’s called “harmonized.”

If you run a business, you might need to charge GST or HST on the things you sell, collect it from your customers, and then send it to the government. But here’s the good part—you can also get some of that tax back through Input Tax Credits (ITCs) when you file your return.

In short, GST/HST is just a way the government collects taxes on most things we buy or sell, but it’s not all bad because you can recover some of it if you’re a business owner!

Provincial GST/HST Rates in Canada (Chart)

Province/Territory	GST	HST	Total Tax Rate	Notes
Alberta	5%	N/A	5%	GST only—no provincial sales tax.
British Columbia	5%	N/A	12%	GST + 7% provincial sales tax (PST).
Manitoba	5%	N/A	12%	GST + 7% provincial retail sales tax (RST).
New Brunswick	N/A	15%	15%	HST applies—combined GST + PST.
Newfoundland and Labrador	N/A	15%	15%	HST applies—combined GST + PST.
Northwest Territories	5%	N/A	5%	GST only—no provincial sales tax.
Nova Scotia	N/A	15%	15%	HST applies—combined GST + PST.
Nunavut	5%	N/A	5%	GST only—no provincial sales tax.
Ontario	N/A	13%	13%	HST applies—combined GST + PST.
Prince Edward Island	N/A	15%	15%	HST applies—combined GST + PST.
Quebec	5%	N/A	14.975%	GST + Quebec Sales Tax (QST) at 9.975%.
Saskatchewan	5%	N/A	11%	GST + 6% provincial sales tax (PST).
Yukon	5%	N/A	5%	GST only—no provincial sales tax.

Who Pays GST/HST, and When Do You Need to Register for a GST/HST Number?

Who Pays GST/HST?

• Consumers: If you’re buying most goods or services in Canada, you’re paying GST/HST. It’s included in the total price, so you might not even notice it until you look at the receipt.
• Businesses: If you’re selling goods or services, you charge GST/HST to your customers and then pass that money to the government. Essentially, you act as the middleman. However, businesses don’t actually “pay” the full GST/HST out of pocket. Instead, they can deduct any GST/HST paid on eligible business expenses (known as Input Tax Credits or ITCs) from the GST/HST they’ve collected. This means businesses only remit the difference between what they collect from customers and what they’ve already paid on expenses.

When Do You Need to Register for a GST/HST Number?

Here’s when you must register for a GST/HST account:

1. Your Sales Are Over $30,000 in a Year
   • If your gross revenue (before expenses) from your business or freelancing crosses $30,000 over four consecutive calendar quarters (12 months), you are legally required to register for GST/HST.
   • Once you cross the $30,000 threshold, you are no longer considered a “small supplier” by the CRA.
2. You’re Not a Small Supplier
   • Even if you haven’t hit $30,000 yet, you can still register voluntarily. Why? Because it allows you to:
     • Claim Input Tax Credits (ITCs) on business expenses.
     • Look more professional to clients who expect you to charge GST/HST.
3. Specific Professions Always Need to Register
   • Certain businesses (like taxi and rideshare drivers) must register for GST/HST no matter how small their earnings are.

How to Check If You Need to Register

Ask yourself these quick questions:

• Are my total taxable sales (before expenses) over $30,000 in the last four quarters?
• Am I selling taxable goods or services (e.g., consulting, retail products, freelance work)?
• Am I running a rideshare or taxi service?

If you answer “yes” to any of these, it’s time to get your GST/HST number.

When Should You Apply for a GST/HST Number?

• Immediately after crossing $30,000 in revenue. You have 29 days after crossing the threshold to register.
• If you want to register voluntarily, you can do it anytime.

How to Register

• You can register for a GST/HST account:
  • Online through the CRA My Business Account.
  • By phone at 1-800-959-5525.
  • Through mail by completing Form RC1.

Do All Products and Services Have the Same GST/HST Rate?

This is another key principle you need to understand to truly master GST/HST—not all products and services are taxed the same. In fact, there are different categories of taxable items, and knowing the difference is crucial for your business.

Let’s break this down:

1. Exempt Products and Services

Some products and services are exempt from GST/HST altogether. This means no GST/HST is charged on them, and you don’t need to collect or remit anything to the government. Examples include:

• Music lessons
• Most health care services (e.g., dental or medical services provided by a licensed professional)
• Childcare services

With exempt items, you can’t claim Input Tax Credits (ITCs) on any GST/HST paid for related business expenses.

2. Zero-Rated Products and Services

Some products are zero-rated, which means they are still subject to GST/HST, but at a rate of 0%. You won’t collect any GST/HST from your customers on these items, but you can claim ITCs on any GST/HST you pay for related business expenses. Examples of zero-rated products include:

• Exports (products or services sold to customers outside Canada)
• Groceries (basic food items like bread, milk, vegetables)

Zero-rated items are like a special case—they don’t cost consumers any extra tax, but they still allow businesses to claim refunds for GST/HST paid on purchases related to these goods.

3. The Business Use Rule for ITCs

It’s important to note that to claim any Input Tax Credits (ITCs) on HST paid for business expenses, those expenses must be for business use only. Personal use expenses won’t qualify. For example, if you buy a laptop for personal use, you cannot claim ITCs for it even if you are a business.

Understanding the different categories and their implications will give you the tools to navigate GST/HST effectively, ensuring you’re paying the right amount of tax and maximizing your potential refunds.

Home Office Expenses and HST: How to Claim ITCs

When you run a business from home, you may be able to claim a portion of the HST paid on your home office expenses. This is a great way to reduce your tax burden, but to qualify, you’ll need to follow a few steps and understand the rules clearly.

Determining Your Home Office Percentage

To claim Input Tax Credits (ITCs) on home office expenses, you must first determine what percentage of your home is dedicated to business use. This is typically calculated based on the square footage of your home office in relation to the total square footage of your home.

For example:

• If your home office is 200 square feet, and your entire home is 1,000 square feet, then your home office represents 20% of the total home space (200 ÷ 1,000 = 0.20 or 20%).

Claiming ITCs on Home Office Expenses

Once you know the percentage of your home that is used for business, you can claim that percentage of the HST paid on eligible home office expenses as Input Tax Credits (ITCs). These expenses might include:

• Utilities (electricity, heating, internet)
• Rent (if you’re renting your home)
• Mortgage interest (if you own your home)
• Home maintenance (repairs specific to the office space)
• Property taxes (if you own your home)

For example:

• If your home office is 25% of your home and you paid $1,000 in HST on utilities, rent, and other eligible home office expenses, you can claim 25% of that amount, or $250, as an ITC.

Important Things to Keep in Mind

• Personal Use: Only expenses related to the business use of your home are eligible. Any personal use portion of the expenses can’t be claimed.
• Apportioning Expenses: For shared expenses like utilities or rent, only the portion that applies to your home office can be claimed.
• Home Office Space Must Be Used Regularly: To qualify, your home office must be used regularly and exclusively for business purposes. Occasional use for personal activities doesn’t qualify.

Understanding how to calculate and claim ITCs for home office expenses can provide significant tax savings for business owners who work from home. With this knowledge, you can maximize your eligible deductions and reduce the amount of HST you need to pay.

PST is Not Refunded for GST/PST Provinces that don’t have HST

Note: While we’ve primarily used the example of 13% HST applicable in Ontario throughout this post, we’ve included the respective GST/HST rates for different provinces at the beginning of the post for reference. For instance, if you’re reading this in Alberta, where only 5% GST applies, you should replace the 13% HST with the 5% GST. Additionally, in provinces where HST is not applicable, goods and services are subject to GST and PST (Provincial Sales Tax). In these provinces, only the GST portion of the sales tax qualifies for ITCs on applicable business expenses—PST does not qualify for refunds.

Meals and Entertainment and GST HST Filing: What You Can and Can’t Claim

Meals and entertainment are often a part of business life—whether you’re meeting a client for lunch, discussing work over drinks, or taking someone to a sports game. The CRA recognizes that these activities are often for business purposes, but the tricky part is that not all of the time is spent on business. You might enjoy watching the game or indulge in your favorite restaurant, and that’s where the rules around HST get specific.

Claiming HST on Meals and Entertainment

When it comes to business meals and entertainment, you can claim up to 50% of the HST paid. That means if you take a client out for lunch and pay HST, you can only claim half of the HST you’ve paid, not the full amount.

For example:

• If you take a client out for lunch and pay $50 for the meal with $6.50 HST (13% in Ontario), you can only claim 50% of the $6.50 HST paid, or $3.25.

Meals with Employees

There’s an important exception when the meal is with employees. In this case, you can claim the full amount of HST paid on the meal, not just 50%.

For example:

• If you have a business lunch with your employees and pay $50 for the meal with $6.50 HST, you can claim the full $6.50 HST if it’s for the employees.

Don’t Forget the Receipt

One crucial thing to remember when claiming meals and entertainment expenses: always keep the receipt. If you lose the receipt, the CRA will require you to reduce the eligible tax by 1% of the full tax rate.

For example:If you take a client out for lunch in Toronto (where the HST rate is 13%) and lose the receipt, you can only claim 50% of 12% HST (1% less than the full rate) instead of the full 13%. So, you lose a bit of your refund if the receipt is missing.

Bad Debt and GST HST Filing: What You Need to Know

In business, sometimes clients run into financial issues or go rogue, and you end up not receiving the full payment they owe. In accounting, this is called bad debt. This can affect how you handle GST/HST that was originally applied to the unpaid portion.

Claiming ITCs on Bad Debt

Let’s say you’ve invoiced a client $500 for a service and charged GST/HST on the total. However, the client can only pay $250 due to financial issues, leaving the remaining $250 as bad debt. The good news is that you can claim ITC on the GST/HST portion of that bad debt amount.

For example:

• If the client owes you $500 and you charged $65 GST (at 13% in Ontario), but they can only pay $250, you can claim the ITC for the GST portion on the $250, or $32.50.

What Happens if the Client Pays Later?

Now, what if the client’s financial situation improves, and they end up paying you the remaining $250? Here’s where it gets a bit tricky. If the client settles the debt later on, you must pay back the ITC you claimed on the original bad debt amount.

For example:

• Going back to the previous scenario, let’s say the client eventually pays you the remaining $250. Since you already claimed the ITC on that portion of the bad debt, you’ll need to return the GST portion ($32.50) back to the CRA.

This ensures that you don’t receive a benefit from HST on money you actually ended up getting after initially not collecting.

Wrapping It Up: More to Come on GST HST Filing!

While we’ve covered a ton in this post, there are still a few important concepts I’d like to touch on. For now, let’s leave them for another post. One crucial area is claiming ITCs for capital real property, which is so important that there’s a separate section in the HST filing form dedicated to it. This is a critical aspect, and it’s essential to get it right. I’ll be sure to link to that post once it’s finalized, and I promise it will be just as interesting and informative—if not more!

Another key topic I plan to explore is walking you through the HST filing form itself. You’ll be surprised by how simple and straightforward it is once you’ve absorbed all the information in this post. Trust me, you’ll feel much more confident about filling out the form when the time comes.

Lastly, there are also special circumstances related to GST/HST that we couldn’t dive into here, such as when selling to Indigenous communities, diplomats, or specific government appointments in certain provinces. We’ll also cover how to handle GST/HST when selling to a customer in the US or another province—what tax rates to apply, if any, and more.

Rest assured, I will link to those future posts as well, so you’ll have a comprehensive understanding of everything GST/HST related. Meanwhile, feel free to check out this CRA GST HST guide.

As always, if you have any questions or concerns, feel free to reach out via the contact form on the website or you can WhatsApp me directly using the link at the bottom of this page. I’m here to help!